Lending growth far below BI target

National banks will unlikely be able to meet the central bank’s lending growth target this year as it will be difficult to disburse an extra large amount of loans this month to meet the target, analysts said.

With the average lending growth recorded until early December, the central bank’s lending growth will be too high to achieve, they said.

Wimboh Santoso, BI’s regulatory and research director, said Thursday that with the latest lending figures, banks must disburse between Rp 60 trillion and Rp 70 trillion (US$7.77 billion) loans in December alone in order to meet the central bank’s 22 to 24 percent loan growth target for this year.

“Banks must disburse Rp 17 trillion loans per week to make that happen,” he told reporters on
the sidelines of a South East Asian central bankers meeting in Jimbaran, Bali.

So far this year, total lending has grown by 18.44 percent up to Dec. 3, while on a yearly basis, loan growth has reached 22.14 percent.

Analysts have shown pessimism on the trend, saying that the central bank’s target will likely not be met.

However, both Wimboh and BI deputy governor Muliaman Hadad were still upbeat that the target could be achieved. “But perhaps the loan growth will near the lower-end of the target,” Muliaman said at the same event.

Although the year-to-date loan growth is “far from the target”, Muliaman believed that December’s loan disbursement should be faster as demands were expected to surge and therefore boost lending to meet the lower-end of the target.

“Historically, December lending is faster as more working capital will be needed,” he added.

Working capital loan growth, according to Muliaman, had recently outperformed consumer and investment loan growth, indicating that businesses have begun to expand again after a slowdown in 2009.

The central bank’s data showed during the period between January to August this year that working capital loan growth reached 15.7 percent, more than the 14.7 percent recorded for consumer loans. Meanwhile investment lending grew by 9.3 percent up to August this year.

Analysts previously expressed concern about overall loan growth in the first quarter during which consumer loans continued to grow faster than working capital loans, meaning that loans were mainly disbursed for people to consume and not to produce.

Working capital loans are perceived to have a multiplier effect on the overall economy.

Muliaman added that next year in 2011, the loan growth target would still be in the range of 22 to 24 percent, but “if this year is going to be at the lower-end, next year loan growth will reach the higher-end”.

Lending is among the top priorities of the central bank to support businesses’ expansion, as Southeast Asia’s biggest economy aims to expand by 6.4 percent next year.

“But we must stay prudent.

“If lending grows aggressively, there are risks of non-performing loans that could hurt the banks’ financial system,” Muliaman added.

Lending of Bank Rakyat Indonesia (BRI), the nation’s largest bank by lending, has grown by 19 percent in the January-September period.

Meanwhile, loan growth of the biggest bank by assets Bank Mandiri reached 23 percent in the same
period. (est)